Strategic Report Governance Financial Statements
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GLOSSARY
Acquisition costs
Comprise directly attributable costs incurred in the selling, underwriting and commencing of insurance contracts. An APM, this is the sum of underlying operating profit and operating experience and assumption changes. The net underlying CSM increase is added back as the Board considers the value of new business is significant in assessing business performance. As such Adjusted operating profit is reported prior to the deferral of profit in CSM as defined below. Adjusted operating profit before tax is reconciled to IFRS profit before tax in the Business Review. An APM, this is the profit/(loss) before tax before deferral of profit in CSM and represents adjusted operating profit before tax plus the impact from non-operating items (investment and economic movement, strategic expenditure, and any adjustments to IFRS for transactions reported directly in equity). In addition to statutory IFRS performance measures, the Group has presented a number of non-statutory alternative performance measures. The Board believes that the APMs used give a useful insight into the underlying performance of the Group. APMs are identified in this glossary together with a reference to where the APM has been reconciled to its nearest statutory IFRS equivalent. APMs regarding our Solvency position are reconciled to the Solvency II excess own funds. APMs which are also KPIs are indicated as such. An exercise enabling a pension scheme to obtain an insurance contract that pays a guaranteed stream of income sufficient to cover the liabilities of a group of the scheme’s members. An exercise that wholly transfers the liability for paying member benefits from the pension scheme to an insurer which then becomes responsible for paying the members directly. A specialist insurance contract contributing to the costs of long-term care by paying a guaranteed income to a registered care provider for the remainder of a person’s life. A Solvency II APM and represents underlying organic capital generation before the impact of new business strain and development costs and other. The degree of confidence that the provision for future cash flows plus the risk adjustment reserve will be adequate to meet the cost of future payments to annuitants. Represents deferred profit earned on insurance products. CSM is recognised in profit or loss over the life of the contracts. Represents the net release from the CSM reserve into profit as services are provided. The figures are net of accretion (unwind of discount), and the release is computed based on the closing CSM reserve balance for the period. The total movement on CSM reserve in the year. The figure represents CSM recognised on new business, accretion of CSM (unwind of discount), transfers to CSM related to changes to future cash flows at locked-in economic assumptions, less CSM release in respect of services provided. The part of DB de-risking transactions that relates to deferred members of a pension scheme. These members have accrued benefits in the pension scheme but have not yet retired.
Adjusted operating profit before tax
Adjusted profit/ (loss) before tax
Alternative performance measure (“APM”)
Buy-in
Buy-out
Care Plan (“CP”)
Cash Generation
Confidence interval
Contractual Service Margin (“CSM”) CSM amortisation
Deferral of profit in CSM
Defined benefit deferred (“DB deferred”) business Defined benefit de-risking partnering (“DB partnering”) Defined benefit (“DB”) pension scheme Defined contribution (“DC”) pension scheme
A DB de-risking transaction in which a reinsurer has provided reinsurance in respect of the asset and liability side risks associated with one of our DB Buy-in transactions.
A pension scheme, usually backed or sponsored by an employer, that pays members a guaranteed level of retirement income based on length of membership and earnings. A work-based or personal pension scheme in which contributions are invested to build up a fund that can be used by the individual member to obtain retirement benefits. An action carried out by the trustees of a pension scheme with the aim of transferring risks such as longevity, investment, inflation, from the sponsoring employer and scheme to a third party such as an insurer. Incurred relating to the generation of incremental value (extending market reach or share) in future years, from developing existing products, markets, or new developments to the Group’s technology and modelling capability, and additionally major business transformational projects related to generating incremental value in future years.
De-risk
Development costs
Drawdown (sales or products) Employee benefits consultant (“EBC”)
Collective term for investment products including Capped Drawdown.
An adviser offering specialist knowledge to employers on the legal, regulatory and practical issues of rewarding staff, including non-wage compensation such as pensions, health and life insurance and profit sharing.
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